Executive summary for capital markets news | Wed 5 Apr 2023

Executive Summary for Capital Markets News | Wed 5 Apr 2023

Southern Cable’s orders get a RM38.3m bump from TNB contract addendum

The contract to supply underground cables and conductors increased from RM293.8m to RM332.1m. The company has a longstanding relationship with Tenaga Nasional Berhad (TNB) for 19 years. Its total orders accordingly increased from RM578.4m to RM609.3m and will be fulfilled until 2024. The orders comprise power cables, wires and other related products – such as aluminium rods – and services including supply and installation of rectifier systems for 5G network. The company has a positive outlook considering tender flows for new projects have resumed in strength. Other than TNB, it is also a registered supplier for Telekom Malaysia Berhad, Sabah Electricity Sdn Bhd, Sarawak Energy Berhad and Petroliam Nasional Berhad. The counter closed at 32 sen.

South Malaysia Industries lodges complaint with SC against Prolexus-related companies

The loss-making property developer company alleged that 20 parties acting in concert with Honsin Apparel Sdn Bhd (Honsin) and Hi-Q Media (M) Sdn Bhd (Hi-Q) have accumulated more than 33% shareholding without making a mandatory general offer. These parties included YB Ventures Berhad, another listed company, an executive director, a substantial shareholder of Prolexus and YB Ventures, and some close relatives. South Malaysia Industries (SMI) announced on 17 Feb that Prolexus Berhad had emerged as a substantial shareholder via the 2 companies with a 10.01% stake. On the same day, Honsin and Hi-Q requested SMI to call for an extraordinary general meeting (EGM) and provide a copy of its record of depositors (ROD) as at 20 Feb. The objective of the EGM was to replace the current 5-member board with Lee Boon Siong and Tan Eik Huang. On 23 Feb, Honsin and Hi-Q filed a lawsuit to force SMI to provide the ROD. According to Paragraph 4.03(1)(c) of the Rules on Take-overs, Mergers and Compulsory Acquisitions, shareholders requisitioning for a board-control seeking proposal in a general meeting is a factor when determining whether an arrangement to act in concert exists. The company has investment properties worth RM90.8m, RM10.85m cash and RM15.77m in borrowings. It booked net losses of RM1.72m in 2021 and RM5.03m in 2022. SMI closed at 60 sen while Prolexus closed at 47 sen.

Al-‘Aqar Healthcare REIT private placement at RM1.20

The issue price represents a 9.5% discount to the volume weighted average price for 5 market days up to 3 Apr of RM1.3254 per unit. It is also at an 8.4% discount to the adjusted closing price of the units on 3 Apr of RM1.31 after taking into account the last closing price of RM1.33 less the income distribution of 2 sen per unit. The exercise was first announced on 2 Sep 2022 with the real estate investment trust (REIT) stating that it plans to raise RM138m via a private placement of up to 118.97m new units or 16.16% of its total issued units, primarily for repayment of bank financing. KAF, CIMB and Kenanga are the joint placement agents. The REIT owns 23 properties valued at RM1.54b comprising 17 hospitals, 3 wellness and health centres, 2 colleges, and an aged care and retirement village. The counter closed at RM1.34 for a market capitalisation of RM1.01b.

L’Oreal buys Australian luxury brand Aesop for USD2.5b

The French cosmetics group struck a deal with Brazil’s Natura & Co to acquire the Australian company at an enterprise value of USD2.53b. It is L’Oreal’s largest brand acquisition and 3rd largest of an Australian company in the consumer products sector. Melbourne-based Aesop is Natura’s most profitable brand. It offers skin, hair and body care products in almost 400 stores and recorded an increase of 22% in sales to USD537m in 2022. The company had double-digit growth across all regions and had a strong 2022 entry into China. Natura’s financials beset by shrinking margins and heavy debt load which forced an organisational shakeup in Jun 2022 should improve with the all-cash sale. It will focus on Avon and The Body Shop. The transaction will be completed in 3Q2023. L’Oreal closed at EUR420.35 while Natura closed at BRL13.11.

Korea’s SK Hynix issues USD1.7b convertible bonds

The bonds by the world’s 2nd largest memory chip maker will be listed in Singapore with a coupon rate of 1.75% per annum and maturity in 2030. It was upsized in a bookbuilding exercise from an original USD1.5b after an oversubscription of 4 times. The bonds will be convertible to 20.1m shares or 2.8%. The proceeds will be used for operations including buying chip production materials. Bank of America was the sole bookrunner. Investors were not concerned about the prevailing chip slump. SK Hynix posted a record quarterly operating loss of KRW1.7t (USD1.4b) for Sep-Dec 2022. Analysts forecast a bigger Jan-Mar 2023 loss before a memory chip industry rebound in 2H2023. The financing should address market concern about the company’s possible short-term liquidity crunch. The stock closed at KRW84,500 (USD64.45).